Top Questions to Ask a Franchisor
March 28, 2017 12:35 PM
You have always wanted to be a business owner and your own boss so you looked into becoming a franchisee. You have done all your homework and saved the money you will need, but now you have to pick a franchisor. This can be a challenging decision. You want to choose a franchisor that has a brand you believe in and who will also offer you the support you will need to be successful with your unit. It is important that you meet with a few franchisors first before rushing into any decision.
Here is a list of top questions you should ask each franchisor that you are considering:
What will the total cost be for your franchise unit?
When starting your own business, you don’t want hidden costs to pop up along the away affecting your bottom line, especially if you are trying to operate on a tight budget. Make sure you have a very clear picture of not only start-up costs, but how much you will need to keep your business open that crucial first year. Ask about the franchise fee, royalty fees, any add-on fees as well as cost of furniture, fixtures, equipment, lease deposits and any ingredients and supplies you will need. Also consider how much you will need for payroll. A franchisor who is really invested in their franchisees will help prepare you as much as possible.
What is the success rate of existing franchisees?
You certainly don’t want to invest in a market that is already so saturated and where existing franchisees are floundering. Don’t be afraid to ask for evidence that franchise units are doing well. Ask if they have conducted any market studies on the territory they are offering you to ensure that it can support more franchises. What are the demographics needed to support a franchise? Also, ask to have an honest discussion of the ups and downs of the business and what you should expect if you sign on.
Do you have any pending or past legal problems?
While this might seem like an awkward question to ask, it is an important one. If they have gone through bankruptcy, going through it now or have any legal issues with their trademarks then you need to know about it upfront. It is up to you to decide if any of it is a deal breaker.
What kind of support do you give your franchisees?
Every franchise program is different. Some franchisors provide a lot of training and support to get you up and running as well as provide continually development, while others take a more hands-off approach and just give you a little bit of training in the beginning and then expect you to fly on your own. Also ask if the franchisor will be in direct competition with its franchisees. You know your personality and level of experience so make sure you pick a franchise program that will be the best fit for you.
What does your training program entail?
Before signing onto a franchisor, make sure you have a clear picture of what is expected of you during the training period and what you will get out of it. Don’t be afraid to ask for the little details because they can have a big impact on what you can and can’t do. Here are some important details you need to know:
- Where will the training take place and how long will it last? How much will the training cost and is there additional cost for transportation living expenses?
- What is the training curriculum?
- What is the background of the people leading the training?
- Will training materials be provided that you can take back and use as you build your own staff?
- Will they provide hands-on support before and after the grand opening as well?
Do you provide assistance with advertising and marketing?
Often times, a franchisor’s corporate headquarters will handle national and international advertising and marketing campaigns which can be a big help for individual franchisees. You should also find out the rules on whether you can do some local campaigning on your own for your individual store.
Some additional questions you should ask include:
- How do franchisees obtain their sales leads or customers?
- What are the primary advertising/marketing vehicles?
- What is the grand opening advertising program and cost?
Are there any products or services that the franchisees must purchase from the franchisor?
Besides the initial franchise fee and royalty fees, sometimes franchisors will also earn money from requiring their franchisees to purchase certain products and services from them. If you don’t know to expect these additional costs, it could affect your budget negatively so this is an important question to ask.
Also ask about all the logistics involved in this as well. For instance, what is the ordering and distributing processes like? How long does it take get your orders? How do the prices compare to if you were to do your shopping on your own?
Are there any new products or services expected to be launched soon?
If they have any exciting new products and/or services on the horizon that might be a deal clincher for you. It is always good to know if the franchisor prizes innovation and is always looking to make improvements for the customer. An innovative franchisor is good news for potential franchisees.
What are your overall objectives and goals for your brand?
Probably one of the most important questions to ask is what the franchisor’s overall vision for their brand is. For you to be passionate about your individual unit, you need to share the same visions and goals as the corporate headquarters. For instance, if you want to run a restaurant that practices sustainability, then you should pick a franchisor who finds that important too. Also you should believe strongly in the products and services you will be selling. If you are looking to open a bakery then you don’t want to choose a bakery franchise whose food you don’t like.
These are all very important questions you should ask a franchisor before signing on. The more homework you do upfront, the better prepared you will be when opening your own business.